Real Estate: Taking The ‘Demon’ Out of Demonetisation
Demonetisation - the most-repeated word used by an entire nation in the current times. Since 8<sup>th</sup> November 2016, the day PM Modi announced this revolutionary step affecting India’s economy, demonetisation has dominated every conversation and been connected with everything wrong happening i
Published -
Jan 19, 2017 5:39 AM
Demonetisation - the most-repeated word used by an entire nation in the current times. Since 8th November 2016, the day PM Modi announced this revolutionary step affecting India’s economy, demonetisation has dominated every conversation and been connected with everything wrong happening in our economy. The purpose of the entire exercise was to clean up the system, and that is how it invariably got connected with real estate.
However, it is less pertinent to debate about the connection between demonetisation and real estate than to clear a lot of myths surrounding the realty sector. It is high time to tame the wild rumours and uninformed angst about the impact of demonetisation - and other macro-economic and policy changes in 2016 - on the Indian real estate sector.
Let’s have a bird’s eye view of the entire market:
Pre-demonetisation:
The Indian real estate sector has been facing significant challenges in the past few years when it comes to sales and overall growth. With a lot of measures, the sector was clearly pointing towards a slow and gradual, but sure recovery.
Post-demonetisation:
Owing to its uniqueness as an economic event, demonetisation brought a lot of confusion, uncertainty – and, most of all, rumour-mongering - especially when it came to the realty sector. No doubt, everyone was affected by this radical measure, and initially all possible economic activities slowed down to a large extent. However, the dust soon settled and economic activity resumed. Unfortunately, this quick return to relative stability is not something that has been adequately captured by the more disaster-focused media channels.
Every critic and observer took the easy way out to describe this event as the death of the real estate sector as we know it. Obituaries were written, the market was more or less written off, builders were expected to shut shop and prices were seen as headed for a terminal nose-dive into next to nothing. Such was the vision of untrained eyes’ imaginations.
This is not to say that the real estate sector has not been affected by the demonetisation move; however, it is important to understand where the pinch really lies, and where the silver lining is. The Indian real estate sector contributes 5-6% of the country’s GDP, and any misinformation in a sector that is largely sentiment-driven can lead to chaos.
To get a clear picture, let us examine how demonetisation has affected the residential market:
This positive development is adequately illustrated by the performance of the JLL Residential (JLLR) division, which has had a phenomenal year and doubled its profits in 2016 over 2014-15 with 60% revenue growth. Such a performance in what has been one of the toughest phases for the real estate sector in more than a decade could not have happened in a declining market environment.
Above all else, these readings vouchsafe the faith that buyers have in developers with credible reputations. Real estate developers with transparent business practices have not been affected by demonetisation, and have instead witnessed sales growth. Such Grade A developers continue to launch new projects, partnering with corporatized consultancies to market them ethically to a highly responsive end-user clientele.
The fact is, demonetisation has already resulted in a major reduction of home loan rate interest rates, and they are expected to reduce further. Developers offering good deals and discounts are maintaining their position in a market which is now ideal for serious end-users.
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